Management of Human Resources in Global Companies (MG478)
Case
Lenovo Merger & Acquisition of IBM x86 Server
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Course
Management of Human Resources in Global Companies (MG478)
Institution
London School Of Economics (LSE)
An case memo analysis of the new cross-border Merge & Acquisition phase Lenovo will be undergoing with IBM x86 Server in the near future. Attempting to answer the question of whether or not Lenovo should consider its history and apply its previous integration framework.
Management of Human Resources in Global Companies (MG478)
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To: Merger & Acquisition Manager – Mr. Huang
From: Consultant - Ms. Jones
Subject: Cultural Integration Strategy
Dear Mr Huang,
I am writing regarding the new cross-border Merge & Acquisition phase Lenovo will
be undergoing with IBM x86 Server in the near future. The question of whether or not
Lenovo should consider its history and apply its previous integration framework is
vital. Particularly since the cultural integration steps taken in the first M&A with IBM
PC were somewhat effective. Still, they were mostly unbalanced, inefficient and only
declared successful after 10 years. Overall, I recommend that Lenovo consider
adopting a similar but updated approach. Here, the first M&A should be considered as
both a guide and a cautionary tale for future strategy. Lenovo should look back and
utilise examples which were positive, while also concentrating on what was
damaging, ineffective and time-consuming.
For accurate recommendations I will be looking back and dissecting business
strategy, what the old M&A integration approaches were, what practices they
implemented and what impacts those eventually had. All the while weighing their
success, and thus, viability for future application with IBM x86.
1
, In 2004 Lenovo’s journey begins the M&A of IBM PCD with a background
aim of what could be framed as an Absorption approach M&A. IBM’s PCD had been
suffering serious losses of since 2001 and while this went on to improve slightly in
later years, they were too aware of risk and offered to sell it in 2004. Lenovo was
doing exceptionally well and sought to expand its market. Once Lenovo purchased
and acquired IBM PCD, it should have officially began to integrate both cultures and
businesses. However, both Lenovo and IBM initially adopted a toxic Preservation
approach, something the new Strategy should avoid at all costs. The cultural
differences between the two proved to be too challenging and there was a reactance to
isolate rather than integrate. Merger Syndrome was worsened by the fact that both had
extremely headstrong reputations, and very distinct missions. Even months after the
M&A, employees were still working separately, and the CEO Stephan Ward had
implemented no changes to any part of the business. Senior managers did eventually
discuss the situation and make begin a gradual integration process. Later, there was a
feeble attempt at employing a Transformative approach, through the introduction of a
specialized business transformation team (BTT), assigned to explore the cultural
differences between Lenovo and IBM in detail. This was accompanied by the
formation of positive, albeit vague, integration guidelines: ‘sincerity, respect, and
compromise’. Unfortunately, due to the previous separation, the team was largely
performative.
In 2005 and onwards, there was a damaging shift to a Reverse Merger approach.
Which resulted in an unbalanced dominance of IBM’s cultural and organisational
ideals. After CEO Ward was fired for disagreeing with the staff reduction and large-
scale integration Lenovo declared they would be bringing in William Amelio as
Lenovo’s new CEO. Notably, Amelio was biased in his praise of western corporate
culture and management style. Leading him to increase the frequency of senior
management meetings, which in turn were all in a western teleconference style, and
the push widespread English. While the company was now slightly more integrated,
there was prevailing dominance of western methods. Moreover, the language barrier
and other difficulties worsened Employee Resistance (King et.al, 2020), causing many
‘original Lenovo’ senior managers to leave the company, tipping the scales even
further. Despite improved corporate performance and superficial organisational
progress in 2007, Lenovo seemed to have lost what a lot of employees had valued.
2
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